Tobacco Deals Investigated
Posted September 19, 1998 7:00 a.m. EDT
WILSON — The first government probe in decades of possible price-fixing in the domestic tobacco market is under way in Wilson.
A federal grand jury is weighing documents involving the country's third largest tobacco leaf merchant.
The grand jury is investigating whether buyers and tobacco companies conspired to drive down auction prices. The Justice Department investigation in Philadelphia follows a preliminary antitrust inquiry begun in January, department spokeswoman Gina Talamona said Friday. She would not elaborate.
Industry officials said at least two companies - Philip Morris Cos. and Brown & Williamson Tobacco Corp. - are under investigation for allegedly exclusionary contract arrangements with tobacco middlemen.
Philip Morris spokeswoman Mary Carnovale said the company received a grand jury subpoena for documents Wednesday. The subpoena sought information on leaf buying, she said.
``We're reviewing the subpoena and will cooperate with the grand jury,'' Ms. Carnovale said.
A spokesman for Brown & Williamson, Mark Smith, would not say whether the company is involved. ``We have a long policy of not commenting on grand jury investigations,'' Smith said.
R.J. Reynolds Tobacco Co. in Winston-Salem, N.C., also received a subpoena,The News & Observerof Raleigh, N.C., reported. ``We are in a position to confirm that we have been subpoenaed, but beyond that we can't comment,'' a Reynolds spokeswoman, Maura Payne, told the newspaper.
In Richmond, Va., tobacco buyer Universal Corp. confirmed the company received grand jury subpoenas that ``seek documents and information about the tobacco industry.'' In a statement Friday, the company said the subpoenas are related to the investigation being conducted by the Justice Department's antitrust office in Philadelphia. Universal is reviewing the subpoenas and will cooperate, the statement said.
Universal is the world's largest independent leaf tobacco merchant, with interests in selecting, buying, shipping and processing.
A Universal spokeswoman, Karen Whelan, did not respond to a request for further comment Friday evening.
The industry officials, who spoke on condition of anonymity, said the investigation first focused on independent buyers who purchase leaf tobacco from farmers.
For three years, the Justice Department has been investigating various elements of the tobacco industry, including many of the major companies. Two federal grand juries, one in Washington and another in New York, are looking into whether tobacco companies withheld evidence from regulators or lied to Congress or regulators about the dangers and addictiveness of tobacco products.
In January, a California biotechnology company pleaded guilty to conspiring to grow high-nicotine tobacco secretly in foreign countries so Brown & Williamson could ``control and manipulate the nicotine levels in its cigarettes.''
As part of the plea negotiated in Washington, DNA Plant Technology Corp., of Oakland, agreed to cooperate in the ongoing investigation. Other subpoena recipients include Dimon International Tobacco Co. in Farmville, N.C., and the Flue-Cured Tobacco Stabilization Corp. in Raleigh,The News & Observerreported.
The subpoena for the Flue-Cured Tobacco Stabilization Corp. demanded membership lists and all minutes from monthly meetings of its board of directors since 1993, said Arnold Hamm, the cooperative's assistant general manager.
Hamm said he doubts that the cooperative is a target of the probe.
``I think this grand jury cast a wide net, and we were just pulled into it,'' Hamm told The News & Observer.
``Once we explain who we are and what we do, they won't be interested in anything we can add to it.''